Market Trade Setup 4th June #Nifty

Yesterday, I was talking about three bad news, Global tensions, GDP numbers, poor auto sales and one good news of crude oil at 61 dollars and what could Nifty likely to react. It was undoubtedly the crude that pushed Nifty up and not only Nifty has conquered the 12000 peak but also broke the election results day high of 12041 and ended at an all time high of 12088, with a whopping 165 point gain.

US markets closed in an absolute flat territory and Asia is looking down today with almost all Asian markets in red. Japan is down more than 150 points and Hong Kong is down close to 100 points. Brent Crude is at 60.9 dollars and Rupee also strengthened a bit to 69.25 to dollar.

On the domestic front, the big news starting today is the MPC meeting which will come up with its recommendations. What will closely be observed are the repo rates and if CRR will be touched or not. Everyone is expecting Repo cut of 25 bps bring down the repo below 6% to 5.75%.

With services inflation touching 5% and overall inflation settling between 3 to 3.5% there is always a scope to cut the rates to 5.5% or less also. It will create a demand for borrowing and subsequently push up the supply as well as trigger growth. So, all eyes will be on 6th June when they will come up with the policy and what would be watched closely will be the tone of the policy, inflation and growth forecast and also the policy rates.

On the derivative front, yesterday the monster rally has created a lot of demand for long positions and suddenly everyone in the market seems to be going long. The overall long positions which were at 58% suddenly jumped to 63% by the end of the day. Even in the options market there was a huge demand for short puts and the Nifty put call ratio jumped from 1.46 to 1.74 by the end of trading yesterday.

As Nifty crossed 12000, a whopping 12.9 lakh contracts were removed from 12000 call and now 12100 call has the highest open interest followed by 12200 call. On the put side 12000 put added a whopping 21.3 lakh contracts followed by 11900 put added 13.4 lakh contracts. 12000 and 11900 put both has almost same open interest for this week expiry.

What is the Nifty call for the day?

Yesterday, I was talking about 40-60 point profit, and if you have taken a long even after the 12020 resistance being broken, you would have made that profit. Yesterday was one of the best days for trade where Nifty gained almost 160 points and today is a different day. A weak Asia means we would also open weak, as we have already finished reacting to Crude oil. We might open slightly down at 12040-12060 range and the first support might come at 12020-12040 range.

The options data suggests that 11890-11920 as a big support zone and Nifty cant break that and intermediate support comes at 12000-12040 zone. If Nifty holds 12000-12040 zone it is advisable to take a long position and keep it till monetary policy is announced on 6th June. If Nifty breaches that and goes below, then wait for it to stabilize and you can postpone the trading to post Ramzan.